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West Virginia University Hospitals, Inc. v. Casey

filed: March 12, 1990.


Becker, Stapleton, and Rosenn, Circuit Judges

Author: Rosenn


ROSENN, Circuit Judge.

On July 6, 1986, West Virginia University Hospitals, Inc. (WVUH or the Hospital) commenced an action against the Governor of the Commonwealth of Pennsylvania and various other officials (the State) pursuant to 42 U.S.C. § 1983. In the action WVUH sought injunctive and declaratory relief invalidating the out-of-state aspects of Pennsylvania's hospital reimbursement program, as well as reasonable attorneys' fees, including expert witness fees, and costs. WVUH claimed that Pennsylvania's medicaid prospective payment system as it applied to the plaintiff violated federal law. The litigation dealt with certain issues which had not been previously litigated and involved complex issues of state and federal medicaid reimbursement law and statutory and constitutional challenges to Pennsylvania's administrative system. On November 30, 1988, the district court entered an order in favor of the Hospital on all significant issues and awarded WVUH substantially the prospective relief requested, as well as attorneys' fees (including expert witness fees) and costs.

Subsequent to that litigation, WVUH applied to the district court for attorneys' fees and following negotiations the parties agreed on the sum of $350,000, which the court approved. The defendants filed a timely appeal with this court vigorously challenging the major aspects of the district court's decision. After oral argument and review of the briefs and record, we rendered our decision on September 5, 1989, affirming the district court's judgment that Pennsylvania's medicaid prospective system as applied to plaintiff violated federal law, but reversing the district court's declaration that Pennsylvania's administrative appeals system as it applied to WVUH violated federal law and the award of retroactive relief. We also vacated the award for expert witness fees insofar as it allowed a sum in excess of thirty dollars per day. We denied WVUH's petition for rehearing.

Based on our decision, we now have before us the Hospital's application as amended for attorneys' fees in the sum of $132,737.47 and $7,394.37 in disbursements in connection with the appeal to this court. The State opposes the application with numerous objections which, although they do not raise the request for fees and costs to the same level of complexity as the underlying litigation, nonetheless present the trappings of major litigation. We grant the motion in part.


WVUH claims that it is entitled to the fees requested before this court because it prevailed on the appeal within the meaning of 42 U.S.C. § 1988. It asserts that the essential question in its lawsuit and on appeal was whether Pennsylvania's medicaid prospective payment system, as it applied to WVUH, complied with federal law. It prevailed in the resolution of this issue in both the district court and on appeal in this court. WVUH acknowledges that we reversed the district court's determination declaring invalid the legality and adequacy of Pennsylvania's administrative appeals system as well as the district court's award of relief retroactive to the filing of the lawsuit. West Virginia University Hosp., Inc. v. Casey, 885 F.2d 11 (3d Cir. 1989). We also vacated the district court's decision allowing expert witness fees of $104,103.00 under 42 U.S.C. § 1988. The Hospital, however, contends that the administrative appeals issue "is subordinate to the central issue" concerning the legality and adequacy of the prospective payment system, and the expert witness fee issue is tangential to the substantive claim concerning the legality and adequacy of Pennsylvania's medicaid prospective system, and arose solely from the question of the total amount of attorneys' fees to be awarded. The Hospital maintains that it has protected its essential legal rights, "will obtain major and permanent changes in Pennsylvania's reimbursement practices," and has thus obtained the "primary relief" it sought. WVUH therefore concludes that it is the prevailing party for purposes of 42 U.S.C. § 1988 and is entitled to all of the attorneys' fees and disbursements requested on the appeal to this court and in connection with earlier efforts to enforce compliance with the judgment of the district court.

The State, responding to the Hospital's application, has raised numerous objections. They may be summarized as follows:

(1) WVUH is not entitled to attorneys' fees in the sum requested because on appeal it lost on "three significant issues": the administrative appeals issue, the retroactivity issue, and the expert witness fees issue. Therefore, the State contends the request for fees should be reduced by seventy-five percent.

(2) This court may not award fees on a direct motion to this court for WVUH's efforts to enforce compliance with the district court's judgment because those services were not rendered in the court of appeals. Specifically, the State challenges fees for WVUH's unsuccessful Rule 70 motion in the district court and for WVUH's efforts to enforce compliance with the district court judgment.

(3) No award should be made for items that represent an unnecessary duplication of effort by multiple counsel.

(4) No award can be made for numerous items of alleged service when the individual entries in the plaintiffs' supporting exhibits lack necessary specificity.

(5) Miscellaneous items of disbursement for telephone, duplicating, and other office expenses were either unnecessary or excessively expensive.


The major issue before us pertains to the State's request for a reduction of attorney's fees under the principles enunciated in Hensley v. Eckerhart, 461 U.S. 424, 76 L. Ed. 2d 40, 103 S. Ct. 1933 (1983), because the plaintiff, WVUH, did not prevail on all the issues raised on appeal. In Hensley, the Supreme Court held that courts must assess the claims advanced and the results achieved by the prevailing party when determining what is a "reasonable" attorney's fee under 42 U.S.C. § 1988. Under Hensley, attorneys are not to be compensated for time spent on claims which are unrelated to successful claims. Id. at 435. However, "where a lawsuit consists of related claims, a plaintiff should not have his attorney's fees reduced simply . . ." because some related claims are unsuccessful. Id. at 440. The court must consider whether the results obtained by the prevailing party justify an award of attorney's fees for hours spent on related but unsuccessful claims. Hensley at 435. When the relief obtained is excellent, the prevailing party may recover fees for "all hours reasonably expended on the litigation." Id. at 436. If the prevailing party does not obtain substantial but only partial relief, a full award of fees for all hours spent on related, unsuccessful claims would be excessive. Hensley at 440.

There can be no doubt that the central issue on appeal, as it was in the district court, was whether Pennsylvania's formulation for reimbursing out-of-state hospitals for their inpatient services to Pennsylvania medicaid recipients violated federal statutory and regulatory law. WVUH prevailed on this issue. The plaintiff argues that the claims in this appeal are related because they emanate from a common core of facts and are based on related legal theories. It asserts that each of the claims raised on appeal cannot be reasonably viewed as "distinct in all respects" from the central issue in the case and it is, therefore, entitled to a full compensatory award. Not surprisingly, the defendants have a different perspective of the Hospital's case. They contend that the issue on which WVUH prevailed was separate and distinct from the claims it lost on appeal. Although the State concedes that all of the issues may have been intertwined at the district court level, that was not the situation before this court. Having prevailed on only one of four issues, the State concludes that the Hospital's fee award should be reduced by seventy-five percent.

Regrettably, except for conclusory statements, neither of the parties provides us with any assistance in determining whether the claims are related or are separate and distinct from the principal claim on which WVUH prevailed. One useful "starting point for separating an unrelated, unsuccessful claim from a related unsuccessful claim is to determine whether a particular unsuccessful claim shares a "common core of facts" with the successful claim or is based on a "related legal theory." Hensley, 461 U.S. at 435. The Court in Hensley also instructs us to interpret " related claims" broadly. Nonetheless, when the plaintiff has not prevailed on a claim "that is distinct in all respects from his successful claim," time spent on the unsuccessful claim "should be excluded in considering the amount of a reasonable fee." Hensley at 440. With these principles in mind, we address the claims which were advanced unsuccessfully by WVUH on appeal.


A. The Administrative Appeals Issue

On appeal, WVUH lost on its claim concerning the legality of Pennsylvania's administrative appeals system and appropriately asserts that this claim is subordinate to the central issue, the legality and adequacy of the prospective payment system. The defendants assert that both parties considered the issue significant because it related to the district court's grant of retroactive relief. The immediate consideration before us, however, is not so much whether the claim is subordinate, but whether it is related to the successful claim for relief.

Whether the Pennsylvania administrative appeals issue is related to WVUH's attack on the alleged violations of Title XIX of the Federal Medicaid Act may be a close question. However, we conclude that the relationship, if any, is remote and that the issue is discrete. WVUH argues that a relationship exists between the two issues because a successful challenge to the administrative appeals system might have opened an avenue for alternative relief. We reject this argument.

We see the factual matrix to the legality of Pennsylvania's administrative appeals system as totally different from the successful challenge to the validity of Pennsylvania's hospital reimbursement program for medicaid services. Pennsylvania's reimbursement plan and its statutes and regulations setting up an administrative appeals system deal with different subjects. The first sets up a specific medical assistance and reimbursement program; the latter creates a state procedural structure applicable to the administrative appeals generally within the Commonwealth. The legal theory and analysis pertaining to each is different. The issues involve two different aspects of the administration of the Commonwealth's medicaid program, governed by different provisions of the Federal Medicaid Act. In essence, we are asked to construe two different statutes, each treating totally different subjects. We therefore reject the plaintiff's claim that it is entitled to a fee amount with respect to its unsuccessful administrative appeals issue. In our judgment, a 15 percent disallowance of the fee requested on the appeal, excluding services pertaining to the post-argument brief which were unrelated to the issue, is reasonable. In our computation, infra, for the attorneys' fees allowance on appeal, we will deduct 15 percent, excluding services pertaining to the post-argument brief.

B. The Retroactivity and Eleventh Amendment Issue

The district court awarded relief retroactive to the day WVUH commenced its lawsuit against the defendants. We reversed and instead ordered relief from the date of the court's initial judgment. The State's position is that this issue was of great significance to it and to WVUH, requiring significant time and effort from WVUH, and that the services the Hospital devoted to this issue should not be compensated. However, we will not dwell long on this issue because obviously the date the relief commences is directly related to WVUH's principal claim; the retroactivity claim had a direct effect on the claim for damages.

Given the relatedness of the retroactive claim to WVUH's successful claims, the court's "rejection" of WVUH's retroactive claim "is not a sufficient reason" for reducing its attorneys' fees. Hensley at 435. On the contrary, we are to assess the appropriateness of a fee award by "[focusing] on the significance of the overall relief obtained by the plaintiff." Id. The Hospital's retroactive claim was related to the principal issue upon which it obtained substantial relief. Therefore, we exercise our discretion and award attorney's fees for all hours reasonably spent on the ...

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